Boston Fed President Eric Rosengren on Friday explained his reason for dissenting from the central bank’s decision to cut interest rates by a quarter percentage point on Wednesday, saying the rate cut wasn’t needed and “risks further inflating the prices of risky assets and encouraging people to take on too much leverage.”
The Fed had a fractious meeting this week, with dissents on both sides of the question.
St. Louis Fed President James Bullard, a dove on the committee, dissented because he wanted a more aggressive rate cut.
Bullard said he was worried that the odds of a recession are rising.
But Rosengren was less worried about the outlook. In a statement, he said the level of interest rates is already “accommodative.”
“While risks clearly exist related to trade and geopolitical concerns, lowering rates to address uncertainty is not costless,” Rosengren said.
“Additional monetary stimulus is not needed for an economy where labor markets are already tight, and risks further inflating the prices of risky assets and encouraging households and firms to take on too much leverage,” he added.
The Fed voted 7-3 to cut its benchmark rate by a quarter-point. That was the most no votes at a single meeting since 2016.
The division on the Fed is making it less clear what the Fed will do next.
Fed Chairman Jerome Powell said the Fed was not sure of the path ahead.
“We’re going to be looking carefully meeting by meeting at the full range of information,” he said.
Seven of the 17 officials are calling for another cut this year, according to the Fed’s latest “dot-plot” projections of interest rates. Many of these dots belong to voting members of the interest-rate committee, said Tom Porcelli, chief U.S. economist at RBC Capital Markets.
Fed Vice Chairman Richard Clarida will be interviewed on CNBC later Friday.
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